Max UFPLS withdrawl before paying any tax ?

PJM_62

Struggling with the maths on this ..
two pension scenarios:
1. If I have a DC pot of 100k, whats the max UFPLS amount I could take out each year before paying any tax? Assuming 3% growth. No other taxable income.
2. If I have a DC pot of 100k, whats the max UFPLS amount I could take out each year before paying any tax? Assuming 3% growth. Existing DB income of 7.5k.

NoMore

The max is 25% of the entire pot, but I'm sure that's not what you mean.

You mean the max you can take out of the pot every year and use up your tax free allowance

In that case its
For 1) 12.5k * 4/3 = 16.666K

For 2) assuming your DB pension is only other source of income its (12.5k - 7.5k) * 4/3 = 6.666K

Growth of the pot doesn't matter in this scenario apart from making how long you can do this for .

Edit: There is also another option in that you could take any amount you want out tax free each year by crystallizing the amount needed to give you what you want 25% tax free and leaving the crystalized portion still in the pension. However once you run out of Pension to crystalize, all further withdrawals would be subject to income tax.

tacpot12

NoMore is correct for the first year. If the personal allowance and your DB income rise in line with inflation, my estimate is that in 1) you would deplete your DC pot in just under 6 years, and in 2) in about 13 and a half.

PJM_62

NoMore wrote: »

Edit: There is also another option in that you could take any amount you want out tax free each year by crystallizing the amount needed to give you what you want 25% tax free and leaving the crystalized portion still in the pension. However once you run out of Pension to crystalize, all further withdrawals would be subject to income tax.

Do you mean .. for a 100k pot, 'crystalizing' the 25% tax free = freezing 25k, with freezing meaning not invested anymore ? ... and the other 75k is still invested.
So I could take the frozen 25k over 2 years (2 x 12,500) , then from year 3, start taking chunks from the unfrozen remainder of the pot. Chunks small enough to not pay tax.

Apologies if thats not what you mean at all , but I cant seem to get my head around this UFPLS thing and what will be best way, in a couple of years from now, to use it on my 100k DC pot and 7.5k DB pension.

NoMore

It basically means you can take your pension pot in chunks, with each chunk having 25% of it tax free. These chunks become crystalised (it means they are sectioned off because they are no longer subject to 25% tax free). The advantage is you can leave the crystallised funds in the pension still invested and growing, while only taking the 25% tax free out.

For example, you want to get 10k out tax free of your 100k pot. You could crystalise 40k of it, take 25% of this tax free (i.e 10k). Leaving 30k in the pension crystallised and growing plus 60k uncrystallised, which at some point in the future you could crystalise all or a portion of it (plus any growth of the 60k) to get further tax free cash. Doing this until all the funds are crystalised, meaning all withdrawals are now subject to income tax.

ColdIron

What you describe is drawdown not UFPLS

NoMore

ColdIron wrote: »

What you describe is drawdown not UFPLS

Thanks, yeah I always get them mixed up. Its still a horrible acronym

xylophone

Its still a horrible acronym

https://www.pensionsandannuities.co.uk/Uncrystallised_funds_pension_lump_sum.htm

Uncrystallised funds pension lump sum, known as UFPLS (also called a FLUMP), .... Better?:)

PJM_62

My scheme only allows FLUMP.
I guess I'm looking for best way to get the 100k out, in as few years as poss, paying no tax.
As well as my 7.5k DB, I have ISA savings to top up my FLUMP withdrawals.
I'm looking to achieve 18k per year, no tax payable.

DairyQueen

PJM_62 wrote: »

My scheme only allows FLUMP.
I guess I'm looking for best way to get the 100k out, in as few years as poss, paying no tax.
As well as my 7.5k DB, I have ISA savings to top up my FLUMP withdrawals.
I'm looking to achieve 18k per year, no tax payable.

Nomore has given you the exact figures you can drawdown tax free using UFPLS, and based on the current personal allowance (12,500), with/without your DB pension.

Neither meet your £18k target so you will need to supplement drawdown with small annual withdrawals from your ISA if you wish to avoid paying income tax,

PJM_62

Yeah I get those 16.6k and 6.6k figures.
But I think what's confused me is nomore saying..
There is also another option in that you could take any amount you want out tax free each year by crystallizing...